Sony Corp. has agreed to buy Bertelsmann AG’s half of their jointly-own venture Sony BMG Music Entertainment, placing a valuation of $1.8 billion on the recorded music company (via the Wall Street Journal).
This is another move in Sony’s plan to provide a vertically-integrated chain of media content, software services, and hardware devices — a technique that has been hugely successful for Apple with that company’s iTunes store, Mac computers, and iPod and iPhone mobile devices. As noted previously, Sony’s past history in this arena has not been good. The company’s previous attempts at integrating its content, services, and devices have generally failed due to Sony’s tendency to “go it alone” rather than integrate with other vendor’s products or support industry standards, along with their efforts to protect their content with overly Draconian restrictions.
However, as also noted in the previous post, Sony CEO Howard Stringer seems to be aware of his company’s past missteps in this regard, and Sony may just get it right this time.
There’s another aspect of the Sony announcement that is encouraging. It demonstrates Sony’s faith in the value of musical content. Despite the downturn in sales of CDs — which, as the Journal points out, as not been offset by the increase in revenue from digital downloads — music content still has value. While Sony is picking up the other half of Sony BMG for only $900 million, the acquisition demonstrates a belief that the company can generate a profit from music sales. Sony hopes to add additional value by integrating its media, software, and hardware businesses, as well as leveraging new distribution channels such as licensing music for cell phone ringtones, movie soundtracks, and video games. If Sony — and others in the space — are successful, it will provide musical artists with access to new channels to generate revenue from their work. That’s a good thing for all of us.